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Nairaland Forum / Nairaland / General / Politics / Naira "Appreciation": Why Nigerians Should Not Celebrate (47188 Views)
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Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by menxer: 10:17pm On Aug 04, 2015 |
there is something about all these pro-barcanista arguments that I don't understand, is it the BDC or CBN that should control/decide what happens to our currency, short, medium or long term? we cannot/should not let the fate of our currency depend on pleasing DOM account holders, if you cannot use the official windows offered by CBN to do your business transactions, pack/park well. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by wristbangle: 10:29pm On Aug 04, 2015 |
989900: The bolded satisfies your point bro. Atleast ban has imposed on these items and now is the time for youth to indulge into production of these commodities. I can't imagine us importing toothpick, brush, and other silly items that can be easily produced here. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by sizl: 10:32pm On Aug 04, 2015 |
I think it is better to do a thorough research before writing up an opinion piece. A little research on the net would have yielded answers to the questions raised. I will try and explain the devaluation of the Naira to the best of my knowledge and the reasons why there is an appreciation in the parallel market It is no secret that Nigeria's major source of income is from the sale of crude oil. I will paint a scenario. Nigeria produces crude oil. The country exports this crude oil and is paid in USD for this in the international market. The CBN (as the bank to the federal government) receives this USD from the federal government and gives the federal government a naira equivalent. This USD the CBN receives is what is currently kept in our 'external reserves'. (This is the reason why the FG cannot simply ask the CBN to give it some of the funds in the country's external reserves, that will be asking for money it has already received). Now, the country being in a net import position, i.e. the country imports more than it exports, need this USD to pay for items brought into the country or to convert NGN earned by multinationals to USD so these companies can repatriate their earnings. The CBN sells this USD to importers etc via commercial banks at the RDAS market. The price of oil in the international market thus has a direct effect on the levels of the external reserves in the country. The higher the price, the higher the level and the corresponding ability of the CBN to keep the naira pegged at the then exchange rate of 160 NGN/USD. This the CBN does by ensuring that demand for USD at the RDAS market are 'reasonably met' at the stated rate. So if demand on a certain Monday is for instance $1 billion, and the CBN has $30 billion in reserves and feels it has adequate funds in reserves, the CBN can easily sell for 160 NGN/USD thus keeping the rate at that band. This formula was hugely successful during the Jonathan era as oil prices hit unprecendented heights as much as $150 per barrel. Fast forward to today, oil prices hover at around 55$ per barrel with a low of about 40$ per barrel this year so far. what is the effect on the country's reserves? We have a situation where internal demand in the country is increasing for USD while supply (income from oil sold) is reducing. Corresponding effect is that the country's external reserves decline at a rapid rate. Now imagine you are a father (The CBN in this case), the food (USD) to feed your family (the nigerian public) goods is now a scare commodity and very difficult to replace and you have 10 food items on your shelf and you currently need these 10 items to last you a year and previously, you used 4 food items per month...are you going to continue at the rate of 4 food items per month or are you going to adjust to the realities on ground and manage the food to last you for the year? That is what the CBN has done. To reduce pressure on the country's external reserves, the CBN devalued the naira. This will reduce demand as you need more naira to get USD (simple law of demand and supply) and adjust the exchange rate to the market realities. The CBN also in a bid to stop commercial banks from hoarding dollars bought at the RDAS market and selling for profit at the interbank market closed the RDAS market completely. This was in a bid to narrow the spread between the interbank and parallel markets...and this worked for a while, the spread was small...until...well, demand was still high. The CBN took a further step, 41 items were listed as being ineligible for FX in the interbank market i.e. these items cannot be funded via USD purchased in the interbank markets, you have to go black market to purchase USD to fund these items. This led to a sudden spike in black market rates, now speculators stepped in. Due to the spike in blackmarket rates, people that had no business buying USD started buying and keeping in the hope that the rates will increase further and they can sell for a profit. This was the primary cause of the 240 USD/NGN rates we saw recently. Banks realised that they were getting a lot of cash deposits in people's dom accounts i.e. people were buying and keeping to sell at a higher rate thus denying the companies and people that really need the USD access to the funds. so what did the banks do? They stopped accepting dollar cash deposits. Now lets say John bought $100,000 in the black market to keep...he goes to the bank to deposit it and all the banks turn him back...John has to thus keep the cash under his mattress at home, but John is afraid of rats eating his USD or his neighbours son breaking into his come to steal his cash...so what does John do? John sells it back to the mall am, takes his naira and deposits it and sleeps happily. Suddenly, there's USD for sale, demand is matching and outstripping supply. Speculators that kept USD in their dom accounts hear of the crashing rates and rush off to sell too thus the rates keep coming down. This is the primary cause of the Naira gaining in the last week. Now this trend may or may not be sustained, this trend will only highlight the extent to which speculators have affected the exchange rate. the root cause of the problem is the falling oil prices and the fact that Nigeria's major export is oil. Until we diversify our economy, we can expect to continuously affected by fluctuations in the international oil price 10 Likes 2 Shares |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by jomoh: 10:33pm On Aug 04, 2015 |
MizMyColi: I've taken my time to see that you're truly a critic and not a wailer that is why I felt the need to let you be cleared on some things. Honestly it is hard for someone to respond to barcanista's threads without resulting to insults. When you see someone who once admitted to knowing little about economics condemning an economic/fiscal policy, makes it very disturbing and annoying. Having gone through your responses to issues and concluding that you must be an enlightened woman, I will like to start by asking this question. In what sane country do you see people selling foreign currencies on the street all in the name of BDCs and speculators? NONE. The fact that he mentioned banks selling dollars to customers shows that he knows little about what he is criticising. Where in the country does he see banks selling dollars to people by hand. Any business man willing to do business with bank should approach his bank and request for purchase of dollars. The bank in turn presents his request to the CBN in form of Bidding which is done twice a week. If he is successful at bidding, the dollars will be paid into his domiciliary account while the amount in Naira, equivalent to dollar he requested for, will be deducted from his account with the bank. All this at a very low official rate which is always lower than the Black market/BDC price. If you are the businessman which one will you prefer official one N199 from bank or black market/BDC 240. So which businessman was he talking about that will go to a BDC to buy $50K from a mallam at a high rate and go to bank to deposit. Even if there are people like that, it only goes to show that either the source of getting the money is questionable or the purpose for which the money is meant is. I must also add that while filling the form for bidding, you have to state for what purpose you need the money and what business you are into. So anyone trying to avoid going through the CBN most have something he/she is hiding. Let's go back to CBN's directive. The CBN woke up and realise the sanity behind what some people has been shouting that BDCs and Speculators are destroying the economy in more ways than one. It is encouraging Money laundry, corruption, distabilisation of the currency(because the CBN don't know the amount of dollars in circulation) e.t.c. Now CBN wants to stem the destructive influence of speculators and BDC's some people are not happy. With these directive, all transactions will have to go through the CBN making all transactions traceable from initiation to termination. A smart and clean businessman will go through the bank to buy the dollar. The banks are not refusing to sell they just don't care what you do with it after buying. You might decide to withdraw it and toke home to design your house. Just don't bring it back for deposit because its not our official currency. If you wish to transfer oversees, tel your account have its BVN so that we can know the real owner and who to hold accountable if the transaction is found questionable later. Now the problem I see is that most people are used to PDP's destructive way of handling the economy that the find it hard to see the sensibility in this directive. The case of barcanista is different not only is he finding it hard to adjust he is very pained that the correction it being made by the government of someone he campaigned rigorously against. Instead of him to accept that he miscalculated and supported the wrong person, he is willing to condemn every policy of the government just to remain relevant at the expense of our great country's progress. I worked with Access bank, GTB and am an accounting Graduate. 8 Likes 1 Share |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by shawndhabi: 10:38pm On Aug 04, 2015 |
paid in dollars today bruv |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by kaboninc(m): 10:42pm On Aug 04, 2015 |
teeowl: It is like you're missing the point. Firstly, your guy deposits USD sourced from the black market. That is at a high rate which will definitely affect his business. Secondly, it is assumed that the banks did call for a ban but am telling you that the CBN spiked it. They were running from sanctions. Because they (the CBN) know the banks will somehow come to the CBN to exchange it. Thirdly, even if he deposits it, into his dom account, I tell you, the eventual sourcing and wiring are done in online form and the banks charge him probably at 216 or 217 or 218 (he pays this differentials in naira via his naira account) and if they want to sell the same cash, it will be at 199 or 196 as the case may be to the CBN. In any case, this same banks gain and we the consumers loose. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by blackgig(m): 10:43pm On Aug 04, 2015 |
Mynd44: Gbam! You just nailed it. OP, over to you! |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by MyMouth(m): 10:44pm On Aug 04, 2015 |
MizMyColi:You do u allow bacanister to brainwash u? U don't seem to have a mind of ur own! |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by Nobody: 10:49pm On Aug 04, 2015 |
Can you explain me how the above came to be In my boss' voice
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Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by kaboninc(m): 11:01pm On Aug 04, 2015 |
jomoh: This is just what I've been wailing about. Lol. When the RDAS and WDAS were still on, we had three markets - CBN, banks (interbank and autonomous) and black market. When demands (bids) are made, they are usually left overs due to fictitious applications. then it accumulates over time within the vaults of these banks. A bank buys on behalf of a customer at 161 (who many not fund his account or just buy, send abroad and send again doing round tripping) and sells at 183. Where did they get that kind of money? Or is the bank's business now money changing? |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by jomoh: 11:15pm On Aug 04, 2015 |
kaboninc: If you ask barcanista what WDAS and RDAS is he won't know yet he is criticsing the policy. Exactly the buy from the CBN, send abroad and back and they take it to black market to sell at a higher rate. Anyone that tries round tripping now will definitely run at loss because of the charges and ultimately he won't be able to sell it at open black market. 2 Likes |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by lastpage: 11:29pm On Aug 04, 2015 |
Mynd44: Well, when one clueless President decided that to BUY OUR VOTES and CONSCIENCE, he began to give Dollars to the following, ....in broad day light: 1.) Obas...especially that silly one wey just Kaput like "i-better-pass" generator (Oni of Ife) and other useless Traditional rulers. Some got it in millions of Dollars and the least one got $250,000:00 2.) Tribal militants like OPC, Creek militants, boko Haram, e.t.c 3.) Musicians and Actors 4.) Area Boys and all sorts of THUGS 5.) SaTANoids and some E-tribal Eediots Now, we all knew this happened mostly between the periods November-December 2014 and January- Febuhari 2015 with the resultant RAPID DEPRECIATION OF THE NAIRA That useless President and his Eme-'foolish' - fiele CBN Governor DESTROYED OUR CURRENCY. To rebuild it back wont take a few months because it is easier to destroy than to build. That Buhari has not found it fit to sack that Emefiele, shows that he has learned NOTHING from History as he is nothing but a SABOTUER to his Government. Now that you know, what are you going to do about it? Lastpage!
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Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by Nobody: 11:39pm On Aug 04, 2015 |
'What "Sane" Countries Does' Firstly, your grammar there is bad. Go back to school Secondly, Naira had depreciated to N206 before appreciating to N199. Thirdly, Banks are only refusing foreign currency cash deposit. If you want to do any forex transaction, do it electronically through the banks so that the CBN can have reliable records of forex transactions. In developed countries, it is unlawful to deposit foreign currencies in the bank because you want to carry out int'l biz transactions. Therefore, steps being taken so far by the banks and the CBN are okay and commendable. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by pee777(m): 11:40pm On Aug 04, 2015 |
I have so much waited for this policy to be implemented as a way to curb local spending and keeping of dollar and other foreign currrencies. My analysis before now is: 1) All transactions involving foreign currencies must pass through your naira account and the bank does the conversion and does the equivalent transfer to the beneficiary. So also any foreign transaction that will hit your account will be automatically converted and naira equivalent deposited into your account. I use paypal and most times the naira equivalent is deducted thereby making me not to even use my dom account again for petty online or foreign transfer. 2) Foreign cash transaction for businesses in Nigeria to be cancel and dom accounts closed. The CBN should strengthen online banking and cashless policy so that transactions and exchange of money between businesses for transactions goes through the bank via online payment systems. No physical foreign currency will be seen as all transactions goes through the bank and bank only uses equivalent and credits or debits naira accounts. This will crash the dollar. The sad thing is that businesses like BDC and the aboki that changes dollar will be drastically killed. 1 Like |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by lastpage: 11:45pm On Aug 04, 2015 |
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Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by Nobody: 11:51pm On Aug 04, 2015 |
q |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by mickey45: 11:51pm On Aug 04, 2015 |
helpee: So do I although I expect them to "grow the engine" soonest, course like a good author I know will say "rather than living below your means, why not increase your means" guess you know him too |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by platodeen(m): 11:52pm On Aug 04, 2015 |
Who z barcanista? Does he ave masters in Economics? Well, i guess d answers 2 d questions asked are d purpose intended 2 b achieved. 1. Dollars would b scarce n men would begin 2 look inward 4 biz. 2. If u are a foreign partner, i would only accept naira during transactions n not dollars. Dat makes my naira more recognized in d international market. Etc 1 Like |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by lastpage: 11:53pm On Aug 04, 2015 |
jomoh: Some parts of your post are not true ...or let me just say they are "plain naive"! I will just summarise that l was at a bank in Lagos late last year, to be specific, it was GTBank at Around Adeniran Ogunsanya area. I wanted to buy some forex to make an offshore payment for a vehicle l bought in the USA. The Bank staff, told me they cant sell Dollars to me, despite my request that l have proof of the transactions and it is legit and l have the naira equivalent. Funnily, and this is where it really gets funny, the Head of the forex desk at that GTBank branch, directed me to a "Mallam' who was lurking nearby and told me "That Mallam can help you". I went to Mallam and told him what l want. Mallam said no problem, he would sell to me but the price was about #30naira per Dollar higher than the bank rate! I went back to the GTBank Staff and asked him why he thinks l should buy it at that rate when all they needed do what use my Form-M to bid on my behalf with CBN? GTBank staff just looked at me and said Oga, if you really need it, that is how we can help you get it. Meanwhile, as l was there "speaking grammar", Mallam has sold Dollars to a few people who dont give a hoot! And the scary part of it was that l saw with my own eyes as the GTBank staff was transferring the Dollar (which they bought officially at a lower rate from CBN, to the Mallam), and l assume they all share the 'extra' on top. The juiciest part of all these is that I HAVE EVERYTHING CAPTURED SECRETLY ON VIDEO. I am torn between exposing this scam (and probably ending the career of those involved) or holding onto it and thus allowing such scam to be ongoing. As someone who have worked in various banks in the late 90's and early 2000's, l have seen it and l can tell you authoritatively that the scam is sanctioned by the Management of every Bank, right from the M.D., to the "trusted" head of Forex Dept in every bank. so, if anyone should be held responsible for this scam, it should be the "big fishes" (from the Managers, to the M.D's,), not just the "small fries" who man the forex desk. Welcome to Round-tripping 2.0! We are still on a "long Tin". Lastpage! 1 Like 1 Share |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by masseratti: 11:55pm On Aug 04, 2015 |
I came late to this thread,Op my brother pls is there anything like black market in UK or the US on foreign currencies? If you say those currencies are highly valued I will give you ten countries where their currency have less value and you won't find black market, the black currency market is the same way we have the black fuel market,the more you look the less you see.some people are making money from it while others suffer.for now I rest my case.open a new thread and let's debate on this I can't even read through the whole 7 pages. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by masseratti: 11:59pm On Aug 04, 2015 |
lastpage:Thank you ooo,right now am on that quagmire, i both dollar last week at 242 I want to transfer the bank told me I can't because of the new policy, am upset but it's a bitter sweet,the bank told me they can pay me back my dollar,i should sell and do my transaction in naira,why won't the Naira appreciate, its a bitter sweet but I know it's the best for us on the long run,wont I do another transaction at a lower rate? Let's give credit to the CBN governor not even Buhari he has no control over it. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by Nobody: 12:00am On Aug 05, 2015 |
My brother, God bless you. I am happy that someone with first hand experience is speaking out. Time will tell kaecy5: |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by luzhioo(m): 12:05am On Aug 05, 2015 |
Nigeria problem is bad govt and leaders |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by mickey45: 12:08am On Aug 05, 2015 |
MizMyColi: Yes o! But we also far from going under. Things shd stabilise soon enough. Then you can buy those "chicky" wears n high heels from obodo oyibo/Chinko without breaking your "kolo" (mud-bank) |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by Nobody: 12:09am On Aug 05, 2015 |
teeowl: Good point Bro. Educate the dull OP. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by Nobody: 12:10am On Aug 05, 2015 |
lastpage: |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by alienvirus: 12:10am On Aug 05, 2015 |
Mynd44:Are you in Oshodi with the area boys? |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by joseph1832(m): 12:11am On Aug 05, 2015 |
kaecy5:Its the same thing that will happen to a man who wants to buy petrol to run his business but couldn't see it to buy. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by Nobody: 12:15am On Aug 05, 2015 |
oluwaahmed: To butress your points, imports become cheap as Nigeria is an import-dependent country. I hope it reaches parity as PMB promised. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by Nobody: 12:19am On Aug 05, 2015 |
pee777:1. CBN has ruled that out. It is ridiculous 2. Naira is the only legal tender in Nigeria (it is the law) 3. Cancelling Dom account is the most ridiculous. No country in the world does that. Ciao.. |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by chloee(f): 12:27am On Aug 05, 2015 |
Emperortj93: |
Re: Naira "Appreciation": Why Nigerians Should Not Celebrate by chloee(f): 12:29am On Aug 05, 2015 |
menxer:Do you have a business that depends on import? |
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